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5G Networks launches capital raising for Webcentral acquisition

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The 5G Networks Ltd (ASX: 5GN) share price is missing out on the market selloff on Friday.

This morning the data networks company requested a trading halt while it undertakes a capital raising.

What did 5G Networks announce?

5G Networks is attempting to raise $30 million via a non-underwritten institutional placement at $1.85 per share. This represents a 13.1% discount to its last close price of $2.13.

The proceeds will be used to provide the company with the balance sheet flexibility to potentially fund an acquisition of Webcentral Group Ltd (ASX: WCG) and the refinancing of its outstanding debt.

However, if the potential acquisition of Webcentral doesn’t eventuate, management advised that it has a range of other potential acquisitions in its pipeline which would constitute highly accretive M&A opportunities.

What is Webcentral?

Webcentral is an Australian full-service digital services partner for small and medium businesses. 5G Networks already owns a 10.2% stake in the company.

It was previously known as Melbourne IT and more recently as ARQ Group. It offers a range of digital growth solutions, helping businesses get online, improve their online performance, and protect their online presence.

Webcentral recently announced that it has entered into a scheme implementation deed with Web.com, under which Web.com proposes to acquire 100% of Webcentral.

However, 5G Networks does not intend to vote its 10.2% interest in favour of the scheme with Web.com.

Instead, it wants to acquire the company and believes there are significant synergies and efficiencies that can be delivered across both businesses.

Management notes that in a scenario where the businesses are combined, it expects that it can generate synergies across both businesses of over $7 million on an annualised basis.

For now, 5G Networks has reconfirmed its FY 2021 revenue and EBITDA guidance of $60 million to $65 million and $8 million to $8.5 million (before material acquisitions).

Management sell-down.

In addition to the above, the company revealed that its managing director, Joe Demase, intends to sell-down his holding.

Mr Demase has agreed to sell 3 million shares, representing 16% of his shareholding, at the same price as the placement.

This will leave the managing director with a relevant interest of approximately 16.2 million shares, representing approximately 15% of the expanded capital of 5G Networks.

The company advised that Mr Demase remains committed and has confirmed that he has no immediate plans to sell more shares.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends 5G NETWORK FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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